DXY: Bias to sell rallies – OCBC

US Dollar (USD) traded under pressure overnight post-CPI release and on comments from Treasury Secretary Scott Bessent. DXY was last at 97.72 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Daily momentum shows signs of turning mild bearish

"In an interview with Fox Business, he said that the 'Fed could have been cutting in June, July' had it had the revised figures (referring to job market data) in hand at the time. He also said that 'The real thing now to think about is should we get a 50 basis-point rate cut in September'. Fed fund futures priced >95% probability of 25bp cut for September FOMC. On CPI, headline CPI was steady at 2.7% YoY while core CPI saw a pick-up (3.1% YoY), driven by services."

"USD price action suggest that markets were worried about more significant price increases (owing to tariffs) before the CPI report, but data release suggests that worries were misplaced - inflation did not accelerate in a meaningful way. Meanwhile, Fed’s other mandate – labour market showed signs of softening. Recent data developments and the dovish tilt seen in some FOMC members suggest that a September cut is more or less a done deal while there may be speculation for 50bp cut, dependent on data outcome or Fedspeaks."

"This week, we hear from Fed’s Barkin, Bostic and Goolsbee. On the data docket, Thursday has PPI and Friday has retail sales and inflation expectations. Data releases this week and Fedspeaks may shape expectations on the trajectory of Fed cut. Daily momentum shows tentative signs of turning mild bearish while RSI is flat for now. Bias for downside play but favour selling rallies instead. Support here at 97.20. Resistance at 99.30 (100 DMA), 100.20 levels."